The Atlantic: The Quiet Coup

[marmar]

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.


by Simon Johnson
The Quiet Coup


One thing you learn rather quickly when working at the International Monetary Fund is that no one is ever very happy to see you. Typically, your “clients” come in only after private capital has abandoned them, after regional trading-bloc partners have been unable to throw a strong enough lifeline, after last-ditch attempts to borrow from powerful friends like China or the European Union have fallen through. You’re never at the top of anyone’s dance card.

The reason, of course, is that the IMF specializes in telling its clients what they don’t want to hear. I should know; I pressed painful changes on many foreign officials during my time there as chief economist in 2007 and 2008. And I felt the effects of IMF pressure, at least indirectly, when I worked with governments in Eastern Europe as they struggled after 1989, and with the private sector in Asia and Latin America during the crises of the late 1990s and early 2000s. Over that time, from every vantage point, I saw firsthand the steady flow of officials—from Ukraine, Russia, Thailand, Indonesia, South Korea, and elsewhere—trudging to the fund when circumstances were dire and all else had failed.

Every crisis is different, of course. Ukraine faced hyperinflation in 1994; Russia desperately needed help when its short-term-debt rollover scheme exploded in the summer of 1998; the Indonesian rupiah plunged in 1997, nearly leveling the corporate economy; that same year, South Korea’s 30-year economic miracle ground to a halt when foreign banks suddenly refused to extend new credit.

But I must tell you, to IMF officials, all of these crises looked depressingly similar. Each country, of course, needed a loan, but more than that, each needed to make big changes so that the loan could really work. Almost always, countries in crisis need to learn to live within their means after a period of excess—exports must be increased, and imports cut—and the goal is to do this without the most horrible of recessions. Naturally, the fund’s economists spend time figuring out the policies—budget, money supply, and the like—that make sense in this context. Yet the economic solution is seldom very hard to work out. .........(more)

The complete piece is at: http://www.theatlantic.com/doc/200905/imf-advice

[jody]

1. "finance industry has effectively captured our government" & final blow will be one world currency.

Mayer Amschel Rothschild, 1790 said "Let me issue and control a nation's money and I care not who writes the laws."

Today we use information technology to create very efficient financial systems that are not limited by borders and Rothschild's promise has become, "Let me issue and control the world's money and I care not who writes the laws."

[Idealism]

2. Interesting article, but I am not sure how real the remorse is.

This story was already told by someone who actually was truly remorseful for the damage the IMF/World Bank did to emerging countries and impoverished states: Joseph Stiglitz.

The rhetoric is nice but the empathy could be stronger, and ultimately this falls on its face when you look at the policies that this man promoted (and apparently still does):

-Currency devaluation
-Privatize everything and anything
-Cut social spending on health care, safety nets, etc.
-Raise central bank interest rates to in some cases 80%
-Infrastructure projects that benefits few outside of the rich and/or multinational corporations
-Labor exploitation and strip worker protection laws
-Land "reforms" that end with foreign companies and/or the oligarchs owning more property that they bought for pennies on the dollar.

And the WORST---

-Complete deregulation of business and finance.

The "one model fits all" the IMF and World Bank have employed in dealing with crisis has unequivocally hurt the countries they have intervened in. Many countries today are still paying off the debts incurred by dictators and military juntas decades gone by because the IMF/WB won't give them debt relief without further conditionality (like deregulation/austerity plans).

To apologize for these things is criminal.

[Demeter]

3. I Expect the Remorse Is Real, And Growing Daily

wait a couple months, and he won't be the only remorseful face on Wall St.

[muriel_volestrangler]

6. But that's not what he promotes in this piece

He advocates:

"nationalize troubled banks and break them up as necessary":
"It would allow the government to wipe out bank shareholders, replace failed management, clean up the balance sheets, and then sell the banks back to the private sector. ... These banks should face a choice: write down your assets to their true value and raise private capital within 30 days, or be taken over by the government."
"Ideally, big banks should be sold in medium-size pieces, divided regionally or by type of business."
"To ensure systematic bank breakup, and to prevent the eventual reemergence of dangerous behemoths, we also need to overhaul our antitrust legislation."
"Still, outright pay caps are clumsy, especially in the long run. And most money is now made in largely unregulated private hedge funds and private-equity firms, so lowering pay would be complicated. Regulation and taxation should be part of the solution. Over time, though, the largest part may involve more transparency and competition, which would bring financial-industry fees down. To those who say this would drive financial activities to other countries, we can now safely say: fine."

I see nothing in that article at all about cutting social spending, stripping labor laws, or the other stuff of which you complain. Are you reading another article by him in which he says completely different stuff?

[Idealism]

7. This is not a policy statement

If you look at the policies this man enacted in Pakistan, Lithuania, Latvia, Poland, etc. you would know about conditionality, economic austerity measures, and structural adjustment plans.

He can write whatever he wants to here, the IMF doesn't concern themselves with banks and has no authority nor credentials here.

[muriel_volestrangler]

8. You said "apparently still does"

which seemed to say you think he advocates the same things for the USA - but he doesn't, going from this article.

The 'authority or credentials' of the IMF are irrelevant - he's not there any more, he's writing about what he thinks should be done.

[Idealism]

9. If you knew the history of the international financial organizations,

you would know their advice never pertains to the US. They offer poison to emerging nations (the conditionality I named) but when there is a crisis in the US, they turn Keynesian. Probably because they know they will never be asked for an emergency loan from the US, so they can offer realistic advice when they have nothing on the line.

[Grinchie]

10. What the IMF did to Jamaica and the Phillipines is criminal.

I guess nobody saw the connections when Dubya appointed Wolfowitz to the World Bank, which is just anohter subsidiary of the Money Changers/Globalists

Helping the poor.. It's more like helping relieve the poor from their sovereign resources by placing them in absolute debt, destroying their agricultural systems, and keeping them uneducated and subservient

[dixiegrrrrl]

4. Very readable analysis of the mess. Echoed by oother good finance writers.

Confirms what many here have been saying...shadow banks and govrnment are in control.

[Laelth]

5. Excellent article. Bust up the oligarchy, or else. n/t

:dem:

-Laelth